Intellectual property law is good. Excess in intellectual property law is not. This blog is about excess in Canadian and international copyright law, trademarks law and patent law. I practice IP law with Macera & Jarzyna, LLP in Ottawa, Canada. I've also been in government and academe. My views are purely personal and don't necessarily reflect those of my firm or any of its clients. Nothing on this blog should be taken as legal advice.

Wednesday, February 24, 2016

Access Copyright and Absent Universities & Colleges – As the Mandatory Elephant in the Room Patiently Waits and Watches

(Forbes)

Here's an update on the Access Copyright Hearing
for a Post-Secondary tariff that supposedly was concluded on January 22, 2016.

Access Copyright (“AC”) is, among other things, seeking
$26 per FTE university student and rigorous record keeping and intrusive audit
rights. If AC gets anything close to what it wants, the result could be a very
major, expensive and intrusive chill on education and research on Canadian
university and college campuses.

The as yet publicly unexplained and perhaps inexplicable
absence of AUCC and ACCC puts the Copyright Board in a difficult and
unprecedented position for a case of this importance. As I’ve suggested before,
the Board could have taken on more of an “inquisitorial” role than usual
– since there was nobody there to challenge AC’s evidence and legal
submissions. On occasion, a few tariffs
have slipped through essentially, if not completely, unopposed because they
were insufficiently commercially important to warrant even minimal opposition. However, this is one that is potentially
worth tens of millions of dollars per year and which has the potential to
impose enormous copyright chill and compliance expense and inconvenience on
Canadian university and college campuses. Important public policy is at stake.

All I will say about AC’s case from I’ve read and seen
and heard is that its evidence and legal submissions – especially on the
significance of Supreme Court of Canada case law – were clearly highly contentious
and readily questionable, although there was nobody there to contest or to
question. It’s very hard to understand why there was no effective and efficient
challenge on the merits to AC’s application, including a challenge to the
Board’s original interim tariff. It is this unchallenged interim tariff that is
now the basis for the litigation against York University. I suggested at the time
how it might have been challenged
and commented on the fact
that it was not.

Based upon what I heard on January 22, 2016, it
does not appear that the Board was noticeably much more “inquisitorial” than
usual. In an “inquisitorial” role, the Board could, to some extent, take it upon
itself to do more research and ask more questions about the evidence and the
legal submissions than it would normally do, the “normal” situation being where
the presence of opposing competent counsel would presumably ensure the unfolding of the
adversarial process for which the Board is designed. The Board could have exercised appropriate inquisitorial
powers (i.e. ask its own questions and do its own investigations) in order to
deal with the lack of submissions or inadequate submissions or evidence from
one or more parties. As long as the Board ensures procedural fairness, this
kind of approach is not only OK. This may have happened to some extent.
However, it was not particularly obvious during the closing arguments that it
did happen here in this instance to any significantly greater extent than
usual.

The Board’s staff can, of course, play a role here
– but that role is limited. Their involvement cannot cross the line of
procedural fairness to the point where Board members are basing their decisions
on material or arguments of which AC is unaware and to which it cannot respond.
The “record” is what it is – and in this case, thanks to AUCC and ACCC, it is
unsatisfactory and incomplete. That said, the Board showed in the recent K-12 decision
that it is prepared to adopt its own methodology, subject of course to
procedural fairness concerns. See paras 350 and 351. I’ll have more to say
about this decision another day.

There was the unusual participation as a lone individual intervenor,
namely one Mr. Sean Maguire, a university student with several bachelors and master’s
degrees who is currently a part-time undergraduate student at Ryerson. He apparently
has had enough time and interest to remain involved throughout for more than
five years, and has apparently been involved in at least one other
Board hearing. His presence was in no way a substitute for
the absence of those who could and should have been there. Mr. Maguire made it
explicitly clear that he repented only himself. And he is clearly neither a
lawyer nor a typical student, given his several degrees and ongoing student
status. Thus, this proceeding was a default proceeding for all intents and
purposes.

Some of the questions from Board members did
indicate concern with relevant issues and appreciation of the importance of relevant
jurisprudence from the Supreme Court of Canada. However, the questioning was no
more “inquisitorial” than usual.

All that said, there was one obvious issue that
apparently was not raised by anyone, including the Board, on the final day or
even earlier in the week according to reliable observers. This, of course, concerns the “mandatory tariff” issue. Spoiler
alert – this is the “elephant in the room” issue.

As readers
of this blog will know, the Supreme Court of Canada made an extremely important November 26, 2015 ruling on this issue in the CBC v.
SODRAC case, based upon submissions
that I made on behalf of Prof. Ariel Katz and the Centre for Intellectual
Property Policy led at the time by Prof. David Lametti, now David Lametti, M.P.
While reiterating my usual disclaimer about how this blog should not be taken as
legal advice, the relevant paragraphs of which follow below, arguably mean that
whatever tariff the Board may award in the current post-secondary proceeding is
optional as far as universities and colleges are concerned. There will be some
who disagree with me about this for whatever reason, or who don’t understand
the Supreme Court of Canada decision.

For further
background on the mandatory tariff theory – which has gone way beyond from
being a theory to a clear ruling by the Supreme Court of Canada – readers may
wish to review:

- Prof. Ariel Katz’ two “Spectre” articles, which have no page
limit constraint, the first of which is now available online and which can be
found here.

Let us hope
that organizations that can benefit from this historic ruling will do so. They
should read and heed the actual clear, lucid and eminently readable rulings of
the Supreme Court of Canada and not rely only upon what may be excessively
cautious, and possibly incomplete or inaccurate (as we occasionally seen) commentary
on the Court’s series of landmark decisions involving fair dealing and now
culminating in a dozen or so paragraphs explaining why tariffs are not
mandatory. They should also read Ariel Katz’ recent remarks about the evolution
of users from being copyright children to copyright adults. This decision should ensure that
Canada’s copyright children have finally come of age.

Anyway, don’t take my word for any of this about the
mandatory tariff theory. Here is what
Justice Rothstein said on behalf of the Supreme Court of Canada in the recent
CBC v. SODRAC case and here is the factum on which this ruling was based:

Once again,
for convenience, here are the pertinent, clear and concise paragraphs from the
Supreme Court of Canada decision about whether or not tariffs are mandatory:

(2) The Board May Not Compel
a User to Agree to the Terms of a Licence Against the Will of the User

(101) CBC argues that, while the Board may fix
the royalties to be paid under the statutory licensing procedure created by s.
70.2 of the Copyright Act, the
Board may not set the other terms or structure of that licence. Specifically,
CBC takes issue with the Board’s decision to impose an interim licence on a
blanket basis, such that CBC pays for access to the entire SODRAC repertoire,
rather than on CBC’s preferred transactional basis, whereby CBC would pay only
whenever it actually used a work from the SODRAC repertoire. A blanket licence
grants access to SODRAC’s entire repertoire for its duration, and thus reduces
CBC’s ability to control its licensing costs. Under a transactional licence, by
contrast, CBC may choose in any given situation whether it wishes to licence a
particular work or forego making use of SODRAC music. CBC argues that if the
collective organization and the user disagree over the model a licence is to
take — blanket or transactional — the Board lacks the power to compel the
execution of a licence.

(102) SODRAC counters that the Board has the
power to issue licences in either blanket or transactional form, and should
have this power in all proceedings under s. 70.2. To hold otherwise, it argues,
would be “to make the Board’s remedial jurisdiction under section 70.2
dependent upon the consent of a user, [and] would be at odds with its mandate
to resolve disputes”: R.F., at para. 133.

(103) Though CBC first raised this issue in the
context of the Board’s Interim Licence
Decision, the dispute relates generally to the Board’s power to
structure licences, whether interim or not: Does the Board’s power to set the
terms of a licence include the power to bind the parties to those terms?

(104)
I do not read the Copyright Act to necessitate that decisions made pursuant to the
Board’s licence-setting proceedings under s. 70.2 have a binding effect against
users. Section 70.2 itself provides that where a collective organization and a
user cannot agree on the terms of a licence, either party may apply to the
Board to “fix the royalties and their related terms and conditions”: Copyright Act, s. 70.2(1). This grant of power speaks of
the Board’s authority to set down in writing a set of terms that, in its
opinion, represent a fair deal to licence the use of the works at issue. It
says nothing, however, about whether these terms are to be binding against the
user.

(105) The statutory context supports the
conclusion that licences crafted pursuant to s. 70.2 proceedings are not
automatically binding on users. Section 70.4 of the Act provides:

70.4 Where any royalties are fixed for a period
pursuant to subsection 70.2(2), the person concerned may, during the
period, subject to the related terms and conditions fixed by the Board and to
the terms and conditions set out in the scheme and on paying or offering to pay
the royalties, do the act with respect to which the royalties and their related
terms and conditions are fixed and the collective society may, without
prejudice to any other remedies available to it, collect the royalties or, in
default of their payment, recover them in a court of competent jurisdiction.

(106)
This provision makes it clear that a user
whose copying activities were the subject of a s. 70.2 proceeding may
avail itself of the terms and conditions established by the Board as a way to
gain authorization to engage in the activity contemplated in the Board
proceeding. The language
of s. 70.4 does not, of its own force, bind the user to the terms and
conditions of the licence.

(107)
The
conclusion that Board licences established pursuant to s. 70.2 are not binding
on users comports with the more general legal principle that “no pecuniary
burden can be imposed upon the subjects of this country, by whatever name it
may be called, whether tax, due, rate or toll, except upon clear and distinct
legal authority”: Gosling v. Veley (1850), 12 Q.B. 328,
116 E.R. 891, at p. 407, as approved and adopted in Ontario English Catholic Teachers’ Assn. v. Ontario (Attorney General),
2001 SCC 15, [2001] 1 S.C.R. 470, at para. 77, and Attorney-General v. Wilts United Dairies, Ltd. (1921), 37 T.L.R.
884 (C.A.), at p. 885. To
bind a user to a licence would be to make it liable according to its terms and
conditions should it engage in the covered activity. In the absence of clear
and distinct legal authority showing that this was Parliament’s intent, the
burdens of a licence should not be imposed on a user who does not consent to be
bound by its terms.

(108) SODRAC’s framing of the issue is not
entirely wrong: the Board does have the power under s. 70.2 to “fix the
royalties and their related terms and conditions”. That is, the Board may decide upon a fair
royalty to be paid should the user decide to engage in the activity at issue
under the terms of a licence. However, this power does not contain within it
the power to force these terms on a user who, having reviewed the terms,
decided that engaging in licensed copying is not the way to proceed. Of course,
should the user then engage in unauthorized copying regardless, it will remain
liable for infringement. But it will not be liable as a licensee unless it
affirmatively assumes the benefits and burdens of the licence.

(109) The matter is complicated considerably by the fact that the Board’s
statutory licence decisions have, in recent years, taken on an increasingly
retroactive character. CBC’s statutory licence in this case provides an
example: the licence covers the period from November 2008 to March 2012, but
the Board’s final decision was issued on November 2, 2012, after the term of
the licence had expired. In situations like these, the Board may issue interim
licences that seek to fill the legal vacuum before the final decision is ready,
but this leaves a user to operate based on assumptions about how their ultimate
liability for actions taken during the interim period will be evaluated.

(110) Should a user engage in copying activity
under an interim licence, and then find itself presented with a final licence
whose terms it would not voluntarily assume, the user is left in a difficult
position: accept the terms of an undesirable licence, or decline the licence
and retroactively delegitimize the covered activity engaged in during the
interim period, risking an infringement suit. This dilemma may mean that a user
who operates under an interim licence has no realistic choice but to assume the terms of the final licence.

(111)
While I find this possibility troubling,
I do not find that this result would detract from the more general proposition
that there is no legal basis on which to hold users to the terms of a licence
without their assent. The
licence is not de jure binding
against users, even if the particulars of a specific proceeding, and a user’s
decision to engage in covered activity during an interim period, may mean that
the user does not de facto have
a realistic choice to decline the licence.[2]

(112)
I conclude that the
statutory licensing scheme does not contemplate that licences fixed by the
Board pursuant to s. 70.2 should have a mandatory binding effect against users. However, this case does not require
this Court to decide whether the same is true of collective organizations. It
may be that the statutory scheme’s focus on regulating the actions of
collective organizations, and the case law’s focus on ensuring that such
organizations do not devolve into “instruments of oppression and extortion” (Vigneux v. Canadian Performing Right Society
Ltd., [1943] S.C.R. 348, at p. 356, per Duff J., quoting Hanfstaengl v. Empire Palace, [1894]
3 Ch. 109, at p. 128) would justify finding that the Board does have the power
to bind collective organizations to a licence based on the user’s preferred
model — transactional or blanket — on terms that the Board finds fair in view
of that model. However, this issue was not argued in this case.

(113) I
find that licences fixed by the Board do not have mandatory binding force over
a user; the Board has the statutory authority to fix the terms of licences
pursuant to s. 70.2, but a user retains the ability to decide whether to become
a licensee and operate pursuant to that licence, or to decline.

(highlight added)

[2]During the hearing before this Court, counsel for the interveners the
Centre for Intellectual Property Policy and Ariel Katz briefly raised concerns
regarding the Board’s power to issue retroactively binding decisions in
general. That issue was not squarely before this Court in this case, and I do
not purport to decide broader questions concerning the legitimacy of or limits
on the Board’s power to issue retroactive decisions here.

There have been some notable post-hearing comments
submitted to the Board. The first is a letter from York University dated February 9, 2016.
York, as is well known, is being sued by Access Copyright – and I’ll have more
to say about that litigation in due course. However, in light of that
litigation, which is based upon the “Interim Tariff” in the hearing under
discussion, it’s notable that there is no explicit reference in York’s letter to
the extremely important ruling of the SCC concerning “mandatory tariffs” mentioned
above. There is only a rather indirect and oblique reference to the issue on
page 5 of the letter to the “hypothetical example” of a university having to
pay the full $26 per FTE for having made a “single copy” of a work in AC’s
repertoire that was not “cleared through alternative licensing arrangements”.

The featured speaker will be none other than
Justice Marshall Rothstein himself, who has recently retired from the Supreme Court of
Canada. He has always been witty, wise and frank in his
public appearances – and will no doubt have much to say of interest and
importance.